7 Ways To Reduce Expenses and Boost Your Cash Flow To Grow Your Business During Tough Times
Do you want to grow your business, reduce your expenses, improve your cash flow and increase your business efficiencies by systemising and streamlining your business processes through outsourcing?
When businesses are experiencing tough times, organisations have to do everything they can to maintain a healthy level of cash flow to continue their operations.
To maintain your business operations during challenging times, one approach to take is to reduce your expenses and avoid a significant reduction in revenue to prevent a drastic decrease in the profitability of your business.
The 7 ways how you can reduce expenses and give your cash flow a boost to grow your business during tough times are outlined below.
1. Reduce overhead costs.
Are you paying for something that perhaps you can live without if you are not using it regularly?
You can review the different subscriptions you have such as industry publications, research reports and other resources that you are not getting much value from as the savings can all add up if you cancel it.
You can also look at all your other costs and cut expenses that are not giving you a decent return for your investment. You can review your profit and loss statement to help you assess how you can cut back some expenses.
Perhaps you can review your utility bills and ask your service provider for a much better deal. You can also shop around to look for cheaper business insurance.
2. Restructure the business.
It is important to consistently review on an ongoing basis how efficient is your company structure and how effective are your different organisational workflows and various business processes.
Customer needs change over time so you may have to adjust your service offerings as there may be new software tools that are available which could make your business processes more efficient.
When you change your business operations, some of your existing processes and the structures you currently have in place may not be as efficient and cost-effective as they could be.
It is beneficial to allocate some time to undertake a regular review of your different business workflows to ensure your organisation is running as efficiently as possible.
3. Review supplier agreements.
Review the contract agreements you have with your suppliers to ensure you are receiving competitive prices and favourable payment terms. Perhaps you can negotiate extended payment terms with your suppliers to help in managing your cash flow better by giving you more time to pay your bills.
You could also ask your suppliers to consider giving you a discount for making early payments.
4. Offer staff flexible time arrangements and part-time work option.
To decrease your payroll expenses without reducing the number of our employees, you can consider offering full-time staff the chance to change their working hours to a part-time basis.
Perhaps you can offer employees some flexibility with their time through job-sharing arrangements with reduced salaries. The reduced hours may not be acceptable to all your employees.
However, it may be suitable for staff who want to spend more time with their family. Perhaps you have some employees who want to allocate some additional hours working on their side hustle so job-sharing arrangements may be suitable for them.
5. Adopt a remote or virtual workforce model.
With the advancement in technology, there have been significant improvements in the different tools that are available for online communications, project management collaboration and managing team workflows.
Adopting a remote or virtual workforce model could drastically reduce your expenses. If some employees can work from home you could reduce the size of the office that you have to rent.
When you downsize your office premises, it will significantly decrease your rental expenses and other related overhead costs that you have to pay when leasing an office.
6. Transform your business to offer online sales and expand your e-commerce platform.
You can consider expanding your business by taking advantage of e-commerce platforms that are available and various online marketplaces where you can sell your products and services.
When you transition your business to online sales as much as possible you could potentially decrease the number of physical stores you have while being able to maintain at least the same level of business income.
By having a reduced number of physical stores you are substantially decreasing your overhead costs. Your payroll costs will also reduce by having a much smaller workforce to manage.
7. Consider using an outsourcing service provider.
When you outsource non-critical business processes to external parties it could assist in decreasing your expenses. Outsourcing certain tasks to freelancers could result in substantial savings.
Having a virtual assistant through an outsource service provider may cost less than employing a full-time staff internally. In addition, when you use an outsource service provider to look after your marketing function it may be more cost-effective than having a marketing team internally.
Using a chatbot service may also reduce the workload of your customer service team so they can focus more of their time on other important high-value tasks such as lead generation activities to help in growing your business.
2 Ways To Improve Your Business Profitability
How can you improve your profitability by systemising and streamlining your business?
The two important ways to improve the profitability of your business is to increase sales and significantly reduce your expenses.
When it is more challenging to increase sales for example, due to the downturn in the economy it becomes more important to closely analyse your internal operations to assess how you can improve business process efficiencies.
You can also review your business costs and determine how you can reduce expenses that allows your organisation to maintain its long-term viability and increase the chance of growing the business even during challenging times based on the economic conditions.
The 2 ways to improve your profitability by systemising your business and streamlining your processes are outlined below.
1. Increasing business efficiencies by systemising and streamlining business processes.
As an entrepreneur, it is easy to get caught up focusing on the daily operations of the business, particularly when there are so many other things that you have planned to accomplish for the day.
Streamlining your business is a great way to help you save time and it allows you to manage your workload more effectively. Streamlining your business involves systemising it which improves business processes that allow your organisation to operate in a much more efficient way.
Streamlining and systemising your business is particularly important for organisations with restricted access to available resources may be due to budget constraints and where inefficiencies in the business can badly affect the cash flow.
Depending on what stage of the business cycle you are at currently, you can streamline your organisational processes to achieve time savings and reduce expenses that allow you to focus on growing your business through the following ways:
- Leveraging the use of outsourcing services.
- Utilising software tools.
- Leveraging technological efficiencies.
- By having the appropriate tools.
- Using proven methodologies.
- By having the relevant business support.
- Creating the appropriate strategies.
- By having profitability measures in place so you can track your progress towards your business goals.
One of the most effective time-saving initiatives for organisations is utilising technology and combining it with outsourcing services to streamline and automate low-value tasks and repetitive activities.
The advancement in technology such as utilising software with artificial intelligence features allows you to streamline and automate various processes such as:
- Processing payments.
- Generating invoices.
- Managing stock levels.
- Providing customer service more effectively such as using chatbot software.
- Accounting and Bookkeeping tasks.
With increasing competition and advancement in technology, organisations need to improve their business processes to make the workflow as efficiently as possible to develop and maintain a competitive advantage.
Systemising your business through outsourcing and automating your business processes allows you to achieve and maintain a competitive edge over your competitors.
It is also important to continuously review your staff's productivity, employee performance reviews and other various people-related processes such as how to effectively train new starters as a way to remain flexible and be agile as you continue to improve your various organisational activities.
When you continuously work on improving your processes including staff related matters on an ongoing basis it will allow your business to remain efficient as much as possible as your company grow.
it is beneficial to also review the following areas in your business:
- The number of employees.
- The accuracy of job descriptions to ensure all employees have clear accountabilities.
- Frequency of staff meetings such as having regular one-on-one meetings with staff and weekly team meetings.
- Communication strategies within the organisation.
- Ensuring the standard operating procedures, operational business protocols and company policies are regularly updated.
- Ensure the relevant procedure documentations remain current.
2. Streamlining your business.
You can consider streamlining the business that allows you to improve your company by gaining organisational efficiencies in key important areas through:
- Systemising your operations.
- Automating your processes.
- Improving your business planning process.
- Following a proven methodology to implement business strategies more effectively.
You can improve the management of business expenses through business process outsourcing. Depending on what stage of the business cycle your organisation is at, will affect the type of profit objectives you are likely to have and what your main focus should be.
If you are in the survival phase where you are offering whatever it takes to survive, perhaps your main focus is to achieve break-even profit.
However, if you are in the ideal 'sell your business' phase you may focus on positioning the company to increase its value. Perhaps you need to mainly focus on generating as many sales as possible to increase your profitability. You may do this as you start the company's sales process to prepare for exiting the business.
Businesses need to adjust and perhaps reinvent the organisational structure and business processes to adapt to changing market conditions and customer demand to remain competitive at different stages of the company's life cycle.
To re-examine the business at specific stages of the company's life cycle requires closely reviewing the organisational processes which take time and resources to do.
According to the article published by National Australia Bank Limited (NAB) in July 2018 about "Getting the best price when selling a business", buyers will find your business more valuable if you have good systems.
In the article, NAB outlines that it is important to plan to give yourself the best chance of finding a suitable buyer and to receive a price for your business that you are happy with.
Based on the NAB article, one of the important ways to prepare your business for sale is by offering excellent systems such as:
- Being able to show that your systems are accurate.
- You can generate an up to date report accurately.
- You regularly monitor key performance indicators.
- You take the appropriate action required in addressing the relevant key performance indicators.
Some business owners are aware that they need to systemise their organisation so that the business can run effectively without them having to be closely involved in the daily operations. However, it may be challenging to have the time to document your processes so that you can train your staff in a more standardised way.
Perhaps you lack the resources and expertise to innovate your business. In these circumstances, you may need to consider business process outsourcing (BPO) as a potential solution that may be suitable for your organisational needs.
Business Process Outsourcing (BPO) Overview
What is business process outsourcing and how does it work?
BPO is when you outsource business processes such as low-value and repetitive tasks to an external service provider where you work with virtual assistants and virtual teams.
The typical business processes which are commonly outsourced are those tasks that are considered as low in value that is repetitive. Perhaps those tasks are not the primary strength of the organisation.
It can include essential services that are not key business-critical functions such as general administrative support tasks. There are at least 100 different tasks that you can outsource. Usually, front-office and back-office functions are typically outsourced.
You can outsource back-office functions such as:
- Human Resources
- General administration such as executive assistant roles
- Quality assurance such as customer service after-sales support
You can outsource front-office functions such as:
- Customer service such as lead generation activities
- Strategic tasks such as preparing the annual business plans and monthly financial reporting
You can outsource the tasks to a freelancer, external consultant or to other small businesses located in Australia which is referred to as onshore BPO. However, you can also outsource the business processes to a company with virtual teams located overseas which is referred to as offshore BPO.
What are the benefits of outsourcing?
When you outsource tasks, it allows you and your team to have some free time to focus on more important areas of your business to grow it. By outsourcing, you can ensure the job is being done by people who have the relevant skillsets to perform the tasks.
There are numerous benefits to outsourcing. Outsourcing is advantageous when the company has to undergo business restructuring as it focuses on reinventing itself to ensure it maintains its competitive advantage.
What are the advantages and disadvantages of outsourcing?
To assist in deciding if BPO is ideal for your business, it is important to assess the advantages and disadvantages of outsourcing.
Advantages of Outsourcing
Some of the advantages of outsourcing are outlined below.
1. Outsourcing enhances overall business efficiency.
Since BPO service providers are specialists who are recruited to undertake a particular business task, the tasks can be performed with much greater accuracy, more efficiently and at a faster pace compared with someone who tries to do it internally.
Outsourcing serves as time-saving initiatives. The time which is saved in undertaking the tasks eventually provide a much better financial result with a higher return on investment.
By outsourcing, it allows the organisation to re-allocate its resources and their teams to focus on working on more business-critical core functions. The improvements in resource allocation can provide the company with its competitive advantage over its competitors.
When the company enhances its competitive advantage, it helps in improving the organisation's unique value proposition that makes it stand out more in the marketplace. It can lead to achieving considerably higher returns by outsourcing certain business processes.
2. Outsourcing improves the profitability of the business.
In most cases, although BPO is an additional expense to your business by outsourcing certain functions can reduce your overall costs compared to maintaining the process internally.
When you keep the process to be performed internally, besides paying for the tasks to be done you are also incurring various administrative expenses about the role such as providing the infrastructure, office desk set-up and the technology required for the staff to perform their job.
Disadvantages of Outsourcing
Some of the disadvantages of outsourcing are outlined below.
1. Data security and the risks of having a lack of oversight.
You may be hesitant to delegate your control over certain processes. While it is natural to experience some hesitations, it is necessary to be able to let go of control in getting the tasks performed.
Trust is an important factor in a BPO relationship. These important concerns can be avoided by ensuring the BPO service provider is reputable with robust security.
2. Challenges when communicating with virtual staff.
When businesses use offshore BPO, communication can cause some concerns due to different time zones, language barriers and delayed or poor communication.
It is important to systemise the business, have business processes documented to ensure a consistent level of standard is achieved, have relevant job descriptions with clear accountabilities and have clear deliverables to manage expectations between the parties involved.
Using a BPO service provider is a very good alternative to assist you in adapting business systemisation as a way to restructure your business to enhance your competitive advantage.
Business processes outsourcing can be done properly by considering virtual teams as an extension of your internal teams. The virtual teams can adapt your company's culture through proper training and appropriate handover of tasks, where there is a mutually trusted relationship with all the parties involved.
When you feel comfortable with the terms of the partnership then using a BPO can help in reducing expenses while adding skilled staff into your team.
To achieve the most beneficial outcome from outsourcing, it is important to assess the possible disadvantages of outsourcing and have the relevant processes in place to overcome these type of concerns.
It is also beneficial to get to know the outsource service provider and ensure that the advantages of outsourcing far outweigh the disadvantages that outsourcing may cause you.
Outsourcing can provide numerous benefits to the organisation. It can provide the most beneficial outcome in systemising and growing your business by ensuring that the organisation can operate effectively without your involvement in its daily operations.
Want More Information?
For more information about how outsourcing works and how beneficial outsourcing services can be for your business, schedule your discovery call to find out how we can help you through our Outsourcing Partner's services.
This article is not intended for use as a source of legal, business, accounting, or financial advice. All readers are advised to seek the services of competent professionals in legal, business, accounting, and finance fields.